Bankruptcy – The consequences of declaring one

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Credit Card Applications » Research » Guides » Building Credit History » Bankruptcy – The consequences of declaring one

Bankruptcy – The consequences of declaring one


Updated: December 26, 2012

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Give the fact that so many individuals and companies around us are declaring bankruptcy today, it might be tempting to follow suit and do the same. However, you need to careful look at all the different circumstances for doing so and only if it seems worthwhile, should you go in for this option.

Remember that there are usually two or more options, and bankruptcy is the last option in most cases. Hence, until and unless you are absolutely sure that there is no other way to go, you shouldn't opt in for this.

Permanent black mark

While it might seem like an easy option to go in for bankruptcy at the moment, you should realize the repercussions of doing so. There are a number of disadvantages of filing for bankruptcy and in many cases; it might lead to a number of problems down the road. One of these will be a permanent remark on your credit history, which will stay for a period of up to 8 years. With this, you will find getting loans and being approved to be quite challenging. In some cases, banks reject candidates that have had a history of bankruptcy.

Loss of credibility

Another consequence of declaring bankruptcy is that you have a big loss in credibility. Financial institutions won't be ready to back your ventures easily and hence, you might find it to be extra challenging to try and get adequate capital if you do decide to start something. For many budding entrepreneurs, this is a huge setback and might end up making it next to impossible for them to start something. Hence, you wouldn't want to be stuck in this position as getting out of it costs more money and a lot of time.

While you will get the support of the government, you need to be careful about whether you are paying a bigger price for this money that you are receiving in the form of aid. Many people don't think long term, which is why they end up paying the price somewhere down the line, when it is applying for a credit card or even just opening a new bank account or something along those lines. Hence, unless you have factored in all of these things, you might not want to jump the gun and declare bankruptcy. Consult with professionals and decide gradually about whether or not this is the right option for you to pursue.

All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products’ Terms & Conditions on the issuing banks' websites.
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